NPS Vatsalya announced, another tax nudge for NPS in Budget 2024: All you need to know

economictimes.indiatimes.com:

In a bid to spread the net wider and make the National Pension System (NPS) scheme more attractive, the government has brought private sector employees at par with government staffers in terms of the tax gains that the pension scheme offers.

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The Budget 2024 has proposed to increase the tax deduction limit on private sector employers’ contribution to their employees’ NPS, from 10% to 14% of the basic salary. This means that all private sector employees can now avail of tax deduction of 14% on employer’s contribution to the NPS under Section 80CCD (2). The existing limit is 10% of the basic salary for private employees, and 14%for Central and state government staffers. For instance, before the Budget, if your basic salary had been Rs.1 lakh, then 10% of this or Rs.10,000 would be eligible for deduction in your hands. Now, this amount will be Rs.14,000. Remember, that this higher tax benefit is available only to employees opting for the new tax regime.

This move is intended to have a three-fold impact: increase tax-savings for employees (see table), help them build a bigger retirement corpus, and enhance NPS penetration. “The ground rules have been harmonised among government and non-government employees, which is a positive step,” says Sriram Iyer, CEO, HDFC Pension Management. “From the taxation perspective, employees will benefit from tax savings.